Many see VPNs as an essential tool to protect your security and privacy online; much like Antivirus software, you shouldn’t go online without it. There’s much debate over whether it’s genuinely worth it or not, but that doesn’t change the fact that VPNs have become a million-dollar industry in only a few years. But how exactly do VPN companies make money? Let’s look at the four ways.
VPN companies earn a sizeable income from selling subscriptions, sometimes as much as 95% profit. They can also make money on free or paid platforms by showing you paid, targeted ads, by making some of your data available to other companies for marketing, or by using your device as an exit node.
Some of these methods may seem like the exact opposite of what a VPN should be doing, but unfortunately, it’s a fact that not all VPNs are as true to their word as they may seem. Some will tell you directly that they will show you ads if you use the free version; after all, they have to make their money somehow. But let’s look at how VPN companies make money in more detail.
VPN Money Making Method Number 1: Selling Subscriptions
Since VPNs are so affordable, many people tend to think that their subscriptions alone cannot possibly make them very much money. But there are two critical factors to bear in mind when looking at the subscription services. Firstly, getting to the masses is vital. Selling one subscription at $80 per annum isn’t much, but selling a thousand of them makes a difference to your pocket.
Secondly, according to a former VPN developer, the subscription service has very low overheads. Since there are so many open-source software options that they can use to create and maintain their VPN, the average VPN user costs the company around $1.85 p.a. On an $80 p.a. subscription, that is a substantial margin. Now multiply that by the thousand users mentioned above.
The flaw in this scenario is also one of the pros of selling subscriptions. To get the masses of subscribers, you need to put a lot of money into marketing. Some VPN companies use seemingly neutral websites and blogs to post “reviews” of their VPN to get subscribers, but they can also advertise in conventional ways. But the more money they spend on marketing, the more they make.
VPN Money Making Method Number 2: Showing Ads
Making money through ads is especially common with free VPN services, though not entirely unheard of with premium subscriptions either. It’s a common enough income source. Other companies like Google and Facebook have been doing it for many years. They will create a profile of your interests and habits and use this to show you targeted ads based on that profile.
Since a VPN can get access to much more of your internet usage data than even Google or Facebook can, they are in a unique position when it comes to creating a profile for selling ads. This makes VPN services, especially free accounts, a much sought-after advertising platform for many businesses, turning it into a lucrative income stream for the VPN company.
There may be some questions about how ethical it is for the VPN company to do this since you trust them to keep your data private. But it’s completely legal and contained somewhere in the terms and conditions that few people bother to read, and even fewer understand if they actually read it. And since they aren’t sharing your data, they are not in breach of contract by doing this.
VPN Money Making Method Number 3: Selling User Data
This is one of the more nefarious ways in which a VPN company can make money and is generally frowned upon by VPN users, even though it is perfectly legal, or even encouraged, to do so in many countries. Even so-called “no-logging” VPNs are often guilty of this, even though they don’t log your activity on their own servers since they can track your online habits in other ways.
But before looking at that side of the coin, some businesses will pay handsomely for information that does not even involve your online history. Simply selling your name, telephone number, and email address can already make the VPN company a pretty penny. And that’s just the information that you give them voluntarily when you sign up!
Imagine what they can do with a complete personal profile built up from your internet usage history. But what about no-logs policies? A VPN company can easily track your online activity without violating its no-logging policies. This is done in three ways:
- Web beacons. These are similar to browser cookies but involve the use of clear image files that track your movement across pages in a website or even through emails. Website owners use them to monitor if you’ve accessed certain pages or content. Again, a VPN can easily create its own web beacons on your device to track your activity.
- Tracking pixels. Also similar in purpose but different in their method of execution. Facebook has been using pixels for many years. It’s a piece of code built into websites that link your Facebook profile to that website, sharing your interests and habits with Facebook. This data can be logged whether you are using a VPN or not and is often visible to the VPN company.
All this data that the VPN company gathers can easily be turned into money since businesses will pay handsomely for verified contact details and lists of interests, hobbies, and habits that they, in turn, can use for sales and marketing purposes. That unsolicited sales call you just received? It’s entirely possible that they got your telephone number from your VPN provider.
VPN Money Making Method Number 4: Supplementing Their Network
Servers cost money to set up and run, and internet bandwidth for those servers costs even more. Yes, if done carefully, it can be very affordable, but there’s something even better than “affordable” – FREE. And a VPN company can do that by using your device rather than a dedicated server as an exit node for their VPN network.
Though it’s not very common, it has been known to happen that VPN companies will use their free subscribers’ devices as exit nodes for their paying customers. This saves the company money, meaning that more of their subscription fees go into their pockets. Some may think it’s worth it since you get the VPN service for free, but it’s also hazardous.
Remember that any activity done over a VPN reveals the exit node’s IP address. If someone uses the VPN to do something illegal, using your device as an exit node, your IP address will be revealed, and you may be implicated in the crime.
VPNs provide an essential service, and they deserve to be paid for what they do. Apart from the costs involved, it takes a lot of effort to build a successful VPN in the overcrowded industry, and the company owners deserve their profit. But before you sign up, study the VPN’s terms and conditions and make sure that you are willing to live with all it entails.